Financial Crime World

Title: FATF Report: Brazil’s Progress in Combating Money Laundering and Financing of Terrorism

Overview

The Financial Action Task Force (FATF) released a report on Brazil’s progress in adhering to international standards for combating money laundering and the financing of terrorism. The assessment was conducted from November 3-7, 2003, by a team of experts from FATF, the Grupo de Acción Financiera de Sudamérica (GAFISUD), and various Brazilian government agencies and financial institutions.

Brazil’s Achievements

Brazil has made significant strides in strengthening its financial regulations and ensuring compliance by its financial sector. Key achievements include:

  • Legislative Framework: Brazil has adopted a comprehensive legislative framework, including Law 9613/98 and sector-specific regulations, which broadly ensures compliance by the financial sector.
  • Reduced Bank Secrecy: Brazil has relaxed requirements for suspicious transaction reporting and reduced bank secrecy to allow broader access by the financial intelligence unit (COAF) to financial information.
  • New Predicate Offenses: Brazil has added new predicate offenses for money laundering and terrorism financing.

Areas for Improvement

Despite these advancements, the FATF report identified some areas for improvement:

  • Bank Secrecy: Bank secrecy still limits the securities regulator’s ability to fully supervise the sector and share information with foreign counterparts.
  • Counter-Terrorist Financing Measures: Brazil should focus on adopting more comprehensive counter-terrorist financing measures.

Brazilian Financial Sector

Brazilian financial institutions currently operate a vast network with approximately $349 billion in assets and $49 billion in equity. The sector comprises over 168 multiple and commercial banks, 45 financing companies, 18 savings and loan companies, 9 mortgage companies, 40 savings and loan associations, 58 leasing companies, and 1,381 cooperatives. Moreover, the insurance sector includes 140 insurance companies, 18 capitalisation securities companies, 77 complementary open pension funds, and 78,500 insurance brokers.

Money Laundering in Brazil

Money laundering in Brazil primarily stems from crimes against the financial system, drug trafficking, and tax evasion. The most common techniques include:

  • Sending money abroad through legal or illegal channels
  • Using nominee accounts
  • Manipulating bingos and lotteries

Challenges in Combating Criminal Activities

Brazil’s geographical situation, with borders with ten countries and nearly 8,000 kilometers of coastline, presents another challenge in combating criminal activities. Extensive cash smuggling through vehicles has been reported, particularly in the tri-border area between Brazil, Argentina, and Paraguay (Foz de Iguaçu). While there is no reported evidence of terrorist financing in the region, the Federal Police continue to monitor the situation closely.

Conclusion

The FATF report acknowledges Brazil’s considerable progress in strengthening its AML/CFT system, but stresses the importance of addressing remaining concerns to improve the effectiveness of Brazil’s measures.